You need to consult with an experienced local elder law attorney about the best course of action here. However, giving away the funds will not work because you will be penalized by Medicaid for making the gift. That could result in a very lengthy loss of Medicaid benefits.
Whether you should try to spend down the funds or place them in a trust will depend on many specific factors that are too complicated to expect a reasonable answer here on Avvo. Again, your best bet is to consult with a local elder law attorney as early as possible to protect your benefits and determine how best to deal with the inheritance.
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Medicaid is need based so you may lose your benefits. There are a variety of options. Speak with your lawyer.
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You would make a huge mistake if you do anything based on Avvo. You should consult an elder law attorney as to the plusses and minuses of a special needs trust. Try Joan Robert or Stephen Silverberg on LI.
See my website for many special needs articles.
Lawrence Friedman, FriedmanLaw, Bridgewater, NJ, 908-704-1900. Certified as an Elder Law Attorney by the ABA approved National Elder Law Foundation, former Chair NJ State Bar Association Elder and Disabilities Law Section, Member Board of Consultors of NJSBA Real Property, Trusts & Estates Law Section, Vice Chair Special Needs Law Section of National Academy of Elder Law Attorneys, and Master of Laws (LL.M.) in Taxation from N.Y.U. School of Law. Visit SpecialNeedsNJ.com for articles and Q&A on elder law, special needs, wills, trusts, estates, and tax. Visit SpecialNeedsNJ.com/blog and subscribe for free timely updates to be delivered to your inbox. Information on both Avvo and SpecialNeedsNJ.com does not constitute legal advice, as it is general in nature and may not apply to your situation or be subject to important changes. No attorney client relationship exists unless set forth in written engagement terms.
Lawrence Friedman, Bridgewater, NJ. Certified as an Elder Law Attorney by the ABA approved National Elder Law Foundation, former Chair NJ State Bar Association Elder and Disabilities Law Section, Member Board of Consultors of NJSBA Real Property, Trusts & Estates Law Section, Vice Chair Special Needs Law Section of National Academy of Elder Law Attorneys, and Master of Laws (LL.M.) in Taxation from N.Y.U. School of Law. Visit SpecialNeedsNJ.com for articles and Q&A on elder law, special needs, wills, trusts, estates, and tax. Visit SpecialNeedsNJ.com/blog and subscribe for free timely updates to be delivered to your inbox. Information on both Avvo and SpecialNeedsNJ.com does not constitute legal advice, as it is general in nature and may not apply to your situation or be subject to important changes. No attorney client relationship exists unless set forth in written engagement terms.
These are questions that should be addressed by your attorney. If you do not have one, you should consult with a personal injury attorney before accepting a settlement as the offer is unlikely far less than you would get with an attorney. That said, medicaid as opposed to medicare would not require a trust, but any valid lien must still be appropriately dealt with.
If you accept the money directly, you will be over income in the month that you receive it, which would make you ineligible for Medicaid for that month. The question of whether you should accept the money directly is impacted by whether you will need to receive Medicaid services that month. If you are receiving extensive services, you likely could not afford to be ineligible for a month.
If you are not receiving extensive monthly services, you would still be ineligible for the month you received the proceeds, but could transfer the funds to a trust in the following month and maintain your eligibility thereafter.
If you are younger than 65, and receiving extensive Medicaid services on a monthly basis, you should strongly consider setting up a Supplemental Needs Trust for the proceeds of the settlement. The monies should never touch your personal bank account. The funds could be used for many things, including purchasing a home in which you could live. If the home is owned by the trust, it would also provide other benefits.
If you are older than 65, the funds would have to be paid into a pooled trust, which would preclude you from being able to transfer any remaining funds over to your beneficiaries.
These matters are complicated, and confusing. You should consult with a qualified elder law attorney as soon as possible. I often help personal injury attorneys structure a settlement to minimize the consequences on the client's government benefits.
I'm not sure whether the "disability" you refer to is SSI, Supplemental Security Income, or SSDI, Social Security Disability Income. If it is SSI, which is only available to people of low income, there would be numerous restrictions on your ability to transfer funds. Part of it would depend on whether you are 65 or older. If you are talking about SSDI, there are no restrictions involving the use of the proceeds of your personal injury settlement.
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Whatever you do with this money will have consequences that affect your current and future benefits. It's tempting to be pennywise, but you will feel pound-foolish if you do not contact an attorney and discuss all of the many options. Also, while there are many options, all will come with some sort of strings because you are on benefits. An attorney can help you craft the best solution for you after analyzing your comfort with risk, your age, your family situation, etc.
I am admitted to practice in New York. This is legal information, not advice.